S.M. ZIADDIN VS COMMISSIONER OF INCOME-TAX
1994 P T D 667
[203 I T R 136]
[Madras High Court (India))
Before Raju, J
S.M. ZIADDIN
Versus
COMMISSIONER OF INCOME-TAX
Writ Petition No. 10345 of 1983, decided on 24/09/1991.
Income-tax---
----Penalty---Interest---Failure to file returns in time---Waiver of penalty and interest---Condition precedent---Disclosure of income and payment of tax-- Payment of taxes for six assessment years in a single day---Tax due for some years not paid in full---Overall discharge of liabilities for all the years considered together---Not sufficient---Discretion not to waive penalty and interest for some assessment years---Justified---Indian Income Tax Act, 1961, Ss.139, 217, 271, 273---Constitution of India, Art 226.
Income-tax is an annual levy. Each "previous year" is a distinct unit of time for the purpose of assessment and the profits made or the liabilities or losses incurred before or after the relevant previous year are immaterial in assessing the liabilities in a particular previous year.
The conditions precedent for the exercise of the discretion for waiver or reduction of the penalty or interest are those mentioned in clauses (a), (b) and (c) of section 273A(1) of the Income Tax Act, 1961. Disclosure of income coupled with the payment of the tax admittedly due on the admitted income is a condition precedent for entitling an assessee for consideration of his claim for waiver of the penalty as well as the interest chargeable and unless the condition is satisfied the Court cannot interfere with the refusal to exercise his discretion by the Commissioner of Income-tax under section 273A.
The assessee disclosed his income for the assessment years 1971-72 to 1977-78 and paid the tax as calculated by him for the six assessment years. After remitting the tax the assessee filed returns on December 4, 1979, and the Income Tax Officer passed assessment orders relating to the six years. While making the order of assessment interest was charged under sections 139(8) and 217 and penalties were imposed under sections 271(1)(a) and 273(b). The assessee applied for waiver of interest and penalty. Waiver was allowed only in respect of some years. On a writ petition challenging the order:
Held, dismissing the writ petition, that it was not in controversy that for certain assessment years, the tax due on the admitted income had not been remitted in full. The fact that there had been excess remittance in respect of one year and that there had been overall discharge of liabilities could not be taken into account. A statutory prescription in the nature of a condition precedent cannot be mutilated by taking into account the mistake pleaded or bona fides alleged. Consequently, it could not be held that any error had been committed in the exercise of the discretion by the Commissioner of Income- tax.
Millan Bone Mills v. CIT (1984) 149 ITR 663 (All.) ref.
V. Parthiban for Messrs N. Thiagarajan and Vijayaraghavan for Petitioner.
N.V. Balasubramaniam for Respondent.
JUDGMENT
The above writ petition has been filed for a writ of certiorarified mandamus to call for and quash the proceedings of- the respondent in C. No.1431 (27)/1980-81 dated August 1, 1983, in so far as it refuses to grant waiver of interest and penalty under sections 139(8), 217 and 273(b) in respect of the assessment years 1972-73, 1973-74 and 1974-75 and consequently direct the respondent-to reconsider the applications dated May 3, 1980, and June 26, 1983.
It is unnecessary for me to go into the details having regard to the limited controversy before me. The fact remains that the petitioner, on November 26, 1979, taking advantage of section 273A of the Income Tax Act, 1961, and disclosing the income for the assessment years 1971-72 to 1977-78, paid the tax as calculated by him for the six assessment years to which a reference will be made hereinafter separately. After permitting the tax, the petitioner, on December 4, 1979, filed returns of income for the six assessment years and the Income Tax Officer, Salem, 7, on April 10, 1980, passed the assessment orders relating to the said six years. The assessment year, the income returned and accepted, the tax paid and the tax actually assessed are as follows:
| Assessment year | Income returned and accepted | Tax paid under section 140A | Tax assessed |
| | Rs. | Rs. | Rs. |
| 1971-72 | 28,820 | 6,707 | 6,081 |
| 1972-73 | 29,000 | 6,279 | 6,440 |
| 1973-74 | 20,980 | 3,089 | 3,213 |
| 1974-75 | 13,960 | 1,216 | 1,290 |
| 1975-76 | 8,970 | 392 | 392 |
| 1977-78 | 13,200 | 858 | 858 |
| | | 18,541 | 18,274 |
While making the order o assessment, the authority also imposed interest under sections 139(8) and 217 of the Income Tax Act, 1961, and subsequently, by order, dated March 26, 1983, penalties under section 271(1)(a) and section 273(b) were also levied. The position relating to the levy of interest and penalty under the provisions referred to above in respect of the years in question is as hereunder:
| Assessment Year | Interest Under Section 139(8) | Interest Under section 217 | Penalty Under Section 271(1)(a) | Penalty Under Section 273(b) |
| | Rs. | Rs. | Rs. | Rs. |
| 1971-72 | 5,919 | 6,034 | 3,041 | 435 |
| 1972-73 | 5,644 | 5,869 | 3,220 | 483 |
| 1973-74 | 2,434 | 2,536 | 1,607 | 241 |
| 1974-75 | 773 | 812 | 645 | 97 |
| 1975-76 | 156 | nil | 196 | 29 |
| 1977-78 | 224 | 248 | 480 | Nil |
| | 15,150 | 15,499 | 9,189 | 1,306 |
While so, immediately after the receipt of the assessment orders, the petitioner appears to have given a petition to the respondent pointing out that he was entitled to the benefit of section 273A and prayed for waiver of the interest as well as the penalty imposable under the provisions referred to above. The respondent, by the impugned, proceedings dated August 1, 1983, allowed waiver as hereunder:
| | Interest charged under section | Penalty levied/leviable |
| Assessment year | 139(8) 217 | under section 271(1)(a) 273(b) |
| | Rs. | Rs. | Rs. | Rs. |
| 1971-72 | 5,919 | 6,034 | 3,041 | 456 |
| 1972-73 | | | 3,220 | |
| 1973-74 | | | 1,607 | |
| 1974-75 | | | 645 | |
| 1975-76 | 156 | | 196 | |
| 1977-78 | 224 | 248 | 480 | |
The respondent has also stated in the impugned proceedings that interest levied under sections 139(8) and 217 and penalties levied under section 273(b) for the assessment years 1972-73 to 1974-75 are not waived as there has been no compliance with section 273A(1)(iii)(c). Aggrieved, the above writ petition has been filed.
Learned counsel appearing for the petitioner vehemently contended, while reiterating the submissions made in the affidavit that, on an overall consideration of the tax liability in respect of the six assessment years as found due and the tax paid would show that the tax paid under section 140A was even in excess of the tax assessed to be due and that inasmuch as the petitioner has bona fide volunteered to disclose the income and paid the tax due thereon on the very date of disclosure of the income to the Department, the penalty and interest ought to have been waived in their entirety, considering the bona fides of the petitioner and that the impugned order in so far as it denies the claim for waiver cannot be sustained in law. Learned counsel contended that there has been no proper application of mind and that the conclusion arrived at to decline waiver in respect of certain periods cannot be justified. Mr. N.V. Balasubramaniam, learned counsel appearing for the respondent, while referring to the provisions contained in section 273A(l)(iii)(c) of the Act contended that the waiver of penalty and interest for the years under challenge could not be granted on account of the fact that the petitioner failed to comply with the necessary condition viz., the payment of the tax on the income disclosed. According to learned counsel, it is not the totality of the tax for various years that has to be taken into account but the liability in respect of each year and the payment that has to be considered and taken note of to see whether there has been proper and sufficient compliance with section 273A(l)(iii)(c) of the Act. Learned counsel also relied upon a decision of the Division Bench of the Allahabad High Court in Millan Bone Mills v. CIT (1984) 149 ITR 663, wherein the Division Bench held that the conditions precedent for the exercise of the discretion for waiver or reduction of the penalty or charging of interest are those mentioned in clauses (a), (b) and (c) referred to above and that inasmuch as the condition precedent to invoke the benefit of clause (c) of subsection (1) of section 273A has not been complied with, the Commissioner could not properly and validly exercise his discretion in favour of the petitioner even for the assessment years for which it has been disallowed. Learned counsel also contended that the reason for not granting the waiver for the years in question is found disclosed in paragraph 3 of the impugned order and that no exception could be taken to the reasoning by the respondent.
I have carefully considered the submissions of learned counsel appearing on either side. I am unable to accept and sustain the objections on behalf of the petitioner to the order in question. Income-tax is an annual levy. Each "previous year" is a distinct unit of time for the purpose of assessment and the profits made or the liabilities or losses incurred before or after the relevant previous year are immaterial in assessing the liabilities in a particular previous year. So far as the facts of this case are concerned, it is not in controversy that, for certain assessment years, the tax due on the admitted income has not been remitted though in respect of one year there had been an excess remittance of tax on the admitted income. The petitioner would contend that it was merely an error of calculation and that, having regard to the fact that the remittance was on the same day, with reference to all the assessment years, the overall discharge of liability and remittance should be taken into account. Learned counsel for the respondent would contend that the petitioner himself apportioned the tax also with reference to the admitted income and he alone paid the tax as calculated by him for the six years separately and that merely because it was done on a single day in respect of all the assessment years simultaneously, the provisions of section 273A(l)(iii)(c) of the Act cannot be said to have been duly complied with.
Having regard to the principle of law, that the compliance with the conditions referred to supra viz., the disclosure coupled with the payment of the tax admittedly due on the admitted income is a condition precedent for entitling an assessee for consideration of his claim for waiver of the penalty as well as the interest chargeable, unless the said condition is satisfied in the present case, this Court cannot interfere with the exercise of the discretion by the respondent, nor could this Court find fault with such exercise of discretion by the respondent on any grounds of mercy. The fact that, in respect of certain years, the admitted tax due on the income returned has not been paid cannot be disputed. Whether the mistake in calculation is pleaded or claimed by the petitioner to exonerate him from meticulous compliance with the conditions prescribed under the statute to render him eligible to the benefit of a privilege of waiver is the question, which really falls for consideration. In my view, a statutory prescription in the nature of a condition precedent cannot be mutilated by taking into account the mistake pleaded or bona fides alleged. Once it is held to be a condition precedent, there is no question of compromising with the compliance with the requirements of the said provision before any one can claim to be entitled to the privilege of waiver: Consequently, on the fact situation before me and having regard to the scope and nature of the stipulation contained in section 273A(1)(iii)(c) of the Act, I am unable to countenance the plea on behalf of the petitioner that the respondent committed any error in the matter of exercise of his discretion. This writ petition, therefore, fails and shall stand dismissed. No costs.
M.BA./149/T.F. Petition dismissed.